Korea is tapping into huge oil reserves in Iraq

Korea is tapping into huge oil reserves in Iraq

October 15, 2009

Korea is tapping into the world’s third largest oil reserves of Iraq. State-run Korea Gas Corp. is teaming up with Italy’s Eni Group, U.S. Occidental Petroleum Corp. and Iraq’s Southern Oil Co. for the 20-year production management rights of an oil field in Zubair, located 20 kilometers (12.4 miles) west of Basra, the Ministry of Knowledge Economy said yesterday.

The Korea Gas Corp.’s stake in the consortium is 20 percent. Eni has the largest stake at 35 percent followed by Occidental at 25 percent. However, the share within the consortium could change in the final stage of the contract, the Korean government said. Those final arrangements are to be reached within the next two weeks.

Korea, heavily dependent on the import of crude oil, has been trying to increase its security by developing Iraqi oil. Iraq lags only behind Iran and Saudi Arabia in proven reserves.

However, due to close ties with the independence-minded Kurdish region, the central Iraqi government has denied Korea’s participation in the bidding on oil field projects.

In the first half of this year, Iraq excluded the Korea National Oil Corp. and SK Energy from bids on developments as it stemmed from a contract signed between the Korean companies and the Kurdish regional government. The Iraqi government called the agreement illegal. The new deal not only is the first for Korea but has opened the window for possible further ventures.

Although the Iraqi government estimates the Zubair oil field holds a reserve of 3.7 billion barrels based on a study from the 1980s, the consortium estimates the field to hold more than 6.6 billion barrels. Currently 195,000 barrels of crude are produced from the field daily. The Korean gas agency and Eni are planning to raise the daily production to a maximum of 1.12 million barrels within seven years through investment in production facilities.

From the daily production, Korea’s share would be 20,000 barrels of crude until 2030. That gives Korea a total of 145 million barrels of crude for the next 20 years. This is roughly the same as two months’ worth of consumption in Korea. The contract also has an option to extend development rights for an additional five years.

“Although Korea’s volume of crude oil is relatively small compared to the total reserve, it is significant that a Korean company is fully participating in a large-scale oil field in Iraq,” said a ministry official.

The Korean gas company will also participate in the bidding on 10 other oil fields in Iraq, including fields in Majnoon, Qurna and Halfaya scheduled for early December.


By Lee Ho-jeong [ojlee82@joongang.co.kr]

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